Cencosud: strategic decision to sell off assets

Date : 31 August 2017

We look at Cencosud’s second quarter results and its plans to sell off assets due to the challenges it faces in Latin America.

Supermarkets: lowest performance of the Group

The Cencosud Group’s year on year revenue was CLP 2,586m (US$4.1m) a +3.2% increase. For supermarkets this was CLP1,863m (US$2.9m) a +1.9% year on year. This was the lowest performance of the whole group.

Results were driven by Argentina with +20.3% in same store sales, and Chile with +3.3%. Brazil was -7.0%, Peru -2.6% and Colombia -5.7%. Chile saw a strong performance in supermarkets, department stores and shopping centres. Argentina saw growth in supermarkets and home improvement.

However, the results represent a drop of 72.2% net profit from the same period of the previous year. This was the third consecutive quarter with a decline in earnings. Cencosud has attributed this to slow economic activity in the region.

Selling US$1m non-strategic assets

Because of the declining profit, Cencosud has announced plans to sell US$1m of non-strategic assets. There has been no confirmation on what these assets are, with speculation that it could be its entertainment division Aventura Center, or its financial subsidiaries in Peru or Argentina.

Cencosud has said “The resulting funds…will be used to reduce company debt and accelerate organic growth in the region.”

Positive future

Cencosud are expecting macroeconomic improvements in Argentina, Peru and Chile. It believes that there will be an acceleration in sales with an improving environment in H2. It also believes that the Chilean and Argentinian markets will remain resilient and healthy.

Omni-channel focus In the future it will be focusing on using an omni-channel approach to improve the customer experience, encouraging loyalty. To date it has increased online product availability and successful launched 90 minutes deliveries in some counties of Santiago.

Cencosud also plans to open 10 new stores in Chile in 2017, and continue implementing drive-thru in its stores.

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